The Joint Interim Committee to Study TRS Health Benefit Plans has released their interim report to the 85th Legislature which includes discussion, conclusions and letters to the Chair. Below is a spotlight on the recommendations directly from the report; however, for complete details please refer to the report.
TRS Care – Conclusion
There are no simple answers to addressing the health care funding shortage for TRS-Care in the next biennium and beyond. However, it is clear that drastic funding and/or benefit changes must occur to ensure the TRS-Care plan is sustainable long-term. Otherwise, TRS-Care faces a $1.3 to $1.5 billion shortfall by the end of the next biennium. If drastic measures are not taken during the 85th Legislative Session, the TRS Board of Trustees (the "Board") would have limited flexibility in providing a new plan design to continue any type of health care plan. In fact, the Board would be forced to increase retiree premiums to account for the projected $1.3 to $1.5 billion shortfall. If the Legislature does not provide any additional funding and makes no legislative changes, the estimated shortfall would be fully borne by the retirees. In order to mitigate costs, the Board would be required to increase premiums in TRS-Care 2, TRS-Care 3, Medicare Advantage 2, Medicare Advantage 3, and for TRS-Care 1 spousal and dependent premiums. The Board would also be forced to administer a combination of increased copayments, deductibles, and out-of- pocket expenses for all plan levels. Since premiums would be increased dramatically, this would likely cause many participants to decrease coverage to the TRS-Care 1 plan. It is projected that the cost of coverage for all retirees in TRS-Care 1 would be approximately $1.08 billion in FY 2018. Additionally, this migration to the TRS-Care 1 plan would create a significant loss of premium revenue which would cause further increases in premiums for TRS-Care 2, TRS-Care 3, Medicare Advantage 2, and Medicare Advantage 3 to subsidize those that would theoretically elect to participate in the TRS-Care 1 plan. Under this scenario, where no significant funding and/or benefit changes occur, funding for TRS-Care would be inadequate to pay claims and sustain the plan through the 2018-2019 biennium. Thus, the Board would likely be obligated to close the TRS-Care plan and begin to phase out current participants. Because retirees are on fixed incomes and greatly depend on their health care benefits, interested parties must prevent this from occurring by embracing changes that make TRS-Care sustainable.
TRS ActiveCare – Conclusion
The focus on TRS-ActiveCare is not on the long-term fund balance, but rather on funding and plan design options that make the offered plans more affordable to employees. As is the case for TRS-Care, there are no easy solutions to address the affordability issues of TRS-ActiveCare. Affordability will continue to plague the plan as health care costs continue to rise. Although health care benefits are just one part of a school district's compensation package, it can be a significant benefit to employees. Furthermore, providing quality, affordable health care plays a vital role in attracting and retaining highly qualified teachers. Thus, it is critical that the affordability issues of TRS-ActiveCare be addressed to ensure Texas is able to hire and retain the most qualified educators for our youth.
It is clear that significant changes must occur to ensure the plan is affordable for all active public
education employees in the long-term. Without significant changes, TRS-ActiveCare would eventually become unaffordable for active employees because premiums would become too excessive. If premiums continue to rise uncontrollably, active employees will soon be forced to find more affordable health care coverage elsewhere, and no longer participate in TRSActiveCare. Interested parties should not allow that scenario to come to fruition. Our hardworking public education employees deserve better.
The Committee also reviewed establishing premiums based on age and/or geographic location.
Under current law, TRS-ActiveCare is required to offer uniform statewide coverage. Because of
this uniform rating, employees who reside in lower cost geographic areas are subsidizing those in higher cost areas. TRS found there is a 92% cost differential between the highest cost area (Region 17 – Lubbock) and the lowest cost area (Region 20 – San Antonio).52 Establishing regional rating methods for determining premiums would significantly increase premiums in certain areas of the state while lowering them in other areas. Thus, attempting to establish premiums based on age and/or geographic location would not achieve plan affordability for all members. Under the HD Plan, areas of the state that would benefit from reduced costs based on their location would be able to opt-out of TRS-ActiveCare and create their own health care program.
Although many other options have been presented in the past, the Committee finds the HD Plan to be the most viable and realistic option to address the affordability problem TRS-ActiveCare currently faces. The HD Plan would certainly present new challenges for participating school districts that are no longer eligible to participate in the plan; however, those districts would adapt like many other districts that already offer their own health care plan. In fact, many districts may discover that they are able to offer more beneficial plans at lower premiums than TRSActiveCare can currently offer.
However, if school districts and active public education employees adamantly oppose the proposed changes in the HD Plan to curb the affordability problem, TRS-ActiveCare may continue operating under the current model. The fact is, premiums for all plan options will continue to increase as health care costs rise. Nevertheless, districts and employees may still prefer the stability that TRS provides and the multitude of coverage options. The decision to make significant changes to the plan, or continue in its current form, must ultimately be left to the active public education employees. The employees are in the best position to recognize what is in their best interest and the legislature should support them in any way possible.